IRS To Delay Issuance of 2016 Refund

October 18th, 2016 No comments

One of the techniques to combat identity theft used by the IRS and state tax jurisdictions is to delay the issuance of taxpayer refunds. So while the IRS encourages taxpayers to file early to minimize identify theft, the IRS’s may decide to delay the issuance of your refund check to combat ID theft. In fact, if a taxpayer is claiming the Earned Income Tax Credit or the Additional Child Tax Credit, the IRS is required by law to delay by a few weeks the issuance of the refund. This delay of issuing refund checks may likely also apply to those who seek tuition credits.

Where the IRS says that it issues most refunds in less than 21 calendar days, it is not uncommon for taxpayers with large refunds to have to wait 10-12 weeks to receive their refunds. During this extended period, the IRS is checking with third parties and the IRS’s internal records of the taxpayer’s filing history to determine if the refund claim appears legitimate. Taxpayers who are concerned about the status of their refund claims need to contact the IRS. The IRS has on its website a Where’s My Refund tool that will show you if the IRS has received your tax return and if your refund claim is being processed.

Whereas many taxpayers like the idea of receiving a large refund from the IRS, this approach may not be healthy in today’s identify theft environment. The “good news” is Read more…


CPA Loses to IRS in Tax Court

October 11th, 2016 No comments

This is an interesting Tax Court case, if for no other reason, it illustrates the importance of a taxpayer working with an experienced and ethical tax professional. For all those taxpayers who are looking for a CPA and their first question is “How much do you charge to prepare a tax return?” rather than inquiring about the experience and expertise of the tax preparer, here is what you may get.

The CPA (Sam D. Kilpatrick v. Commissioner of Internal Revenue U.S. Tax Court, Dkt. No. 17242-13, TC Memo. 2016-166, August 29, 2016) was audited by the IRS, was denied deductions he had claimed on his personal tax return and was assessed accuracy-related penalties, and decided to represent himself in Tax Court. Perhaps Mr. Kilpatrick never heard of the saying “An attorney who represents himself in court has a fool for a client.” Undoubtedly, this also applies to CPAs who decide to represent themselves.

Mr. Kilpatrick conducted his CPA practice Read more…


Have You Abandoned Your Retirement Account?

October 4th, 2016 No comments

Governor Wolf and the State Legislature of Pennsylvania took a bold step that could conceivably affect the IRA retirement accounts of PA residents. In the budget bill passed in July, a new provision makes it easier for PA to deem IRA retirement accounts “abandoned,” which would thereby require these accounts to be turned over to the state as unclaimed property regardless of the age of the owner of the account.

First, is this legal? Unfortunately for PA taxpayers, it is legal. All states have abandoned property laws, known as escheatment laws. These laws allow a state to take possession of individuals’ lost property so the state could use its greater resources (such as tax and property records) to find lost owners and reunite them with their property. The premise of the law is good. Whether states actually use their greater resources to find the property owners is questionable.

How does the escheat process work? Read more…


Estate Tax Planning Strategy – Minority Interest Valuation

September 27th, 2016 No comments

The Treasury Department has issued new proposed regulations that, if adopted as proposed, will effectively eliminate a common estate planning tool used to transfer wealth among family members.  That tax planning tool is the Family Limited Partnership (“FLP”) or Family Limited Liability Company.

Let’s start with the basics. A family creates a FLP which provides a centralized vehicle through which the family can not only manage a portion of its wealth, but also provide a governance structure through which the younger generation can learn the art of running a family business (if the FLP holds the family business) from the senior generation. The older generation receives both general and limited partnership interests for the assets transferred to the FLP. At some point in the future, Read more…


Refinancing – Preparation Steps

September 20th, 2016 No comments

Whenever interest rates begin or are expected to change significantly, individuals immediately begin to think of refinancing their existing mortgage. That is a good approach to take. However, there are other considerations to ponder before going to the mortgage company and applying for a refinancing.

Mortgage lenders want to verify that you have sufficient income to service the debt. Standard industry practice is to request to see your individual income tax returns for the last 2-3 years. If you are self-employed, that means the lender also wants to see the tax returns for your business. If you are a sole proprietor, your personal tax return will suffice because the income and expenses of your business are reported on Sch. C of Form 1040, your personal income tax return. However, if your business is in the form of an S Corporation or partnership, the lender will also ask to see those returns (Form 1120S and Form 1065, respectively).

Lenders can often be difficult to work with Read more…


NJ Proceeds to Terminate Reciprocal Tax Agreement with PA

September 13th, 2016 No comments

NJ Governor Chris Christie announced that, effective January 1, 2017, NJ is unilaterally terminating the state’s reciprocity agreement with PA. Under the current agreement, taxpayers were allowed to pay income tax in the state where they lived, not where they worked. Accordingly, PA residents who are employed in NJ will need Read more…

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Talk Is Cheap! Or . . . You Get What You Pay For

September 6th, 2016 No comments

Taxpayers often mistakenly believe that they can rely upon Internal Revenue Service (IRS) advice. After all, if the IRS is providing the advice, why would it challenge a taxpayer’s return that incorporated that advice? To the contrary, the IRS is seldom held accountable for the advice it provides to taxpayers.  Let’s look at some of the more commonly-recognized IRS tax advice resources.

Oral Advice: Taxpayers can telephone the IRS or visit an IRS office (if you can find one that is open to the public) to obtain advice. Unfortunately, oral advice from the IRS is the least reliable type of guidance. As the saying goes, you get what you pay for. Taxpayers who depend upon IRS oral advice could find themselves Read more…


Property Acquired by Gift or Through an Estate Inheritance

August 30th, 2016 No comments

We often hear from clients who have received a gift or an inheritance and inquire as to how much this will cost them in taxes that need to be paid.

The good news is that the recipient of a gift or a bequest pays no gift or estate tax.

The “bad news” is that the taxes due, Read more…



August 23rd, 2016 No comments

Under the Affordable Care Act, large employers must either offer “minimum essential coverage” that is “affordable” and that provides “minimum value” to their full-time employees and their dependents, or potentially make an employer shared responsibility payment to the IRS. The employer shared responsibility provisions are sometimes referred to as “the employer mandate” or “the pay or play provisions”.

If you are an employer who had less than 50 full-time employees, including full-time equivalent employees, on average during the prior calendar year (2015), you are Read more…


“You Are Going to Be Arrested” says the Criminal

August 16th, 2016 No comments

Scammers are calling taxpayers and threatening to have a magistrate come to their home unless they pay their IRS tax debts. The IRS has reported that it is seeing a significant increase in automated phone calls from con artists pretending to work for the IRS and demanding overdue taxes.

If you do not answer your phone, these criminals leave urgent callback requests on your voice mail telling you to call back to settle your “tax bill.” The bogus calls generally purport to be the last warning before the IRS takes legal action against unsuspecting taxpayers. When a victim calls back, the con artist threatens to arrest or deport the taxpayer or revoke their driver’s license if they don’t agree to pay up.

The scammers have increasingly been asking unsuspecting taxpayers to make the payment via iTunes gift cards and similar cards. The IRS pointed out that Read more…

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